ATP, Hilleroed, Denmark, earned 132.2 billion Danish kroner ($20.1 billion) in returns from its hedging portfolio, contributing almost 98% of the pension fund’s overall returns for the year ended Dec. 31.
The pension fund, whose total assets grew 21.6% over the year to 823.6 billion Danish kroner, said the remaining 6.1 billion Danish kroner was earned in the investment portfolio, the equivalent of a 6.5% return.
The pension fund’s hedging strategy aims to correlate with expected future payouts to participants. ATP achieves this primarily by purchasing “very long-dated fixed-rate bonds or by entering into interest-rate swaps,” according to its website.
Equity investments gained 8.5 billion Danish kroner in returns. In a statement accompanying the results, ATP said interest rates, credit, infrastructure and real estate allocations also delivered positive returns. Further details could not be learned by press time.
However, the pension fund recorded negative returns from two areas in particular. Its oil investment dropped 2 billion Danish kroner and its long-term inflation hedge lost 5.9 billion Danish kroner.
“Our investment portfolio benefits from good returns on especially equities, real estate and infrastructure,” said Carsten Stendevad, CEO at the pension fund, in the statement. “We saw negative contributions from investments in oil and our long-term hedges against sudden spikes in inflation.”
Mr. Stendevad warned that a rapid rise in inflation “would harm the purchase power of pensions, and therefore ATP has a strategic portfolio of long-term inflation hedges to protect the purchasing power of our pensions.”
The pension fund is 115.8% funded.
A spokesman for ATP could not be reached for comment by press time.